Avtovaz mass layoffs could bankrupt entire city

Russia's largest carmaker Avtovaz continues to struggle through the crisis with multimillion dollar government donations unable to stop its plans of shedding thousands of jobs.

Employees blame the management and now they are set to stage a series of rallies to vent their anger.

The facts are stark: Lada sales have halved this year. Its manufacturer, Avtovaz, has lost more than 600 million dollars and company debt stands at over two billion.

A hundred thousand people work for Avtovaz in the city of Togliatti on the Volga River – and even more for its parts suppliers. Directly or indirectly, almost every family there depends on income from the carmaker. In fact, the whole city has developed and expanded in order to service the needs of the plant. Unsurprisingly, the mood there is grim.

The Industry and Trade Ministry says the carmaker needs to make half its workforce redundant to simply survive.

Vera Alekseychuk has worked at Avtovaz for fifteen years. She says everybody feels uncertain about their future, as well as about their families and the city: “If we lose Avtovaz, we might just as well leave.”

Workers are now planning a series of strikes to protest against the management. Union chief Petr Zolotarev claims the owners have misspent company money and failed to build a working relationship with dealerships.

“The management never listens to us, and now we have to pay for their incompetence with our jobs,” Petr believes.

Avtovaz is jointly owned by the government, a Russian investment company and French carmaker Renault. The company’s senior management team has changed several times in the last decade.

The question is: can any management save Avtovaz now? For a start, its model range is extremely outdated. The company itself recently admitted its cars were of a very low quality. In fact, Lada was losing its share in the market well before the economic crisis hit, which not even world players like General Motors were immune to.

The government has given sustained support to Lada in the form of high tariffs for imported cars and cheap loans. Without government aid the situation with Avtovaz would be a complete disaster, specialists say, noting at the same time that additional money is not a way out, as structural reform is needed.

As the situation looks no closer to a resolution, the government is stuck between having to spend taxpayer money keeping the loss-making giant afloat – or seeing a whole city decimated by unemployment.